One of the advantages of bringing in an outsider to run a struggling business is that the new boss can take a fresh look at strategy, and has the freedom to deliver a more honest assessment than an insider might be allowed.
The new boss of Dixons Carphone, Alex Baldock, certainly took full advantage of that freedom in his first trading update to the City on Tuesday, as he delivered a brutal assessment of what he clearly sees as a series of failures on the part of the previous management team.
In the job for just eight weeks, Baldock replaced Sebastian James, who left the electrical goods to mobile-phone retailer unexpectedly earlier this year to run the high street chemist chain, Boots.
James departed after Dixons Carphone had reported a plunge in first-half profits and just days before it hit the City with news of a further steep fall in earnings.
There was more grim news on Tuesday from the new boss: profits for the financial year just ended will slump from £501 million (€575.3 million) to £382 million and are set to fall even further in the current year, to around £300 million. This is well below analysts’ forecasts, which have already been reduced several times over the past year.
Baldock also announced the closure of almost 100 stand-alone Carphone Warehouse stores, as the group struggles to adapt to the changing mobiles market in which customers are holding on to their phones for longer and opting out of expensive monthly contracts.
In a blistering assessment, the new boss told the City the group was “nowhere near” making the most of its strengths, adding: “And we must, nobody is happy with our performance today.”
He’s clearing away unnecessary layers, speeding up decision-making and “working at pace to bring clear long-term direction to the business”, as well as rectifying previous underinvestment.
“We won’t tolerate our current performance in mobile, or as a group,” he said. “We know we can do a lot better.”
In delivering such a stark verdict on the group’s performance and slashing profit expectations, Baldock was taking advantage of another prerogative of a new boss – kitchen sinking (the term used when a company announces all the bad news in one go).
Dixons Carphone shares slumped by more than 25 per cent at one stage yesterday, although the City appreciated Baldock’s candour. He needs to remember, though, that kitchen sinking can be done only once; it won’t be long before investors are demanding to see some evidence that he’s making a difference.
Pret windfall
At a Pret a Manger branch in north London on Tuesday morning, the baristas were far too busy serving customers their lattes and honey granola pots to check the Twitter feed of their chief executive, Clive Schlee.
But news soon spread that not only was Pret being taken over in a £1.5 billion deal, but that each of its 12,000 staff will be awarded a £1,000 windfall once the takeover of the coffee and sandwich chain goes through.
A few hours after the announcement that Pret’s owner, private equity group Bridgepoint, was cashing in after 10 years, Schlee used the social media site to deliver the good news to staff: “Today is a big day for @Pret,” he tweeted.
“As we welcome JAB, we’ll be thanking the people who really matter by giving each of our 12,000 employees £1,000 when the deal completes.”
For JAB, the new owner of the business, this is just the latest in a series of sizeable deals aimed at carving out a bigger share of the lucrative and increasingly competitive global coffee and snacks market. Controlled by Germany’s billionaire Reimann family, JAB already owns Kenco coffee, Krispy Crème doughnuts and Dr Pepper.
The first Pret a Manger opened in London in 1986 and since then the chain has grown to 530 outlets worldwide, including the US, Hong Kong and France.
The prospect of a takeover windfall could be the solution to Pret’s staffing problems in the UK – for the next few weeks at least. Last year the group told a parliamentary committee of its fears over recruitment in post-Brexit Britain, revealing that just one in 50 applicants for jobs at the chain was British and about 65 per cent of its UK workforce comes from EU countries other than Britain.
Pret has not given any further detail about the proposed staff windfall, other than to say it will be given to all employees on its books on the date the deal is formally completed, expected to be sometime in the summer. Said Schlee: “It’s serendipity for those who have just joined.”
Fiona Walsh is business editor of theguardian.com
